Desert Lion in lithium deal with BASF, stock up 62%

Desert Lion Energy Inc. [DLI-TSXV; DSLEF-OTCQB], a Namibian lithium development company, said Tuesday April 2 that it has entered into a non-binding offtake agreement with German chemical company BASF SE. Under the agreement, BASF would be able to purchase lithium hydroxide from a planned Desert Lion production facility to be located in Namibia.

Desert Lion shares rallied sharply on the news, rising 62% or $0.065 to 17 cents on volume of over 3.0 million shares. The shares trade in a 52-week range of $0.04 and $1.46.

On its website, Desert Lion is described as an emerging lithium development company and early-stage producer, focused on building Namibia’s first large-scale lithium mine on a site located 210 km from Windhoek, the Namibian capital.

The company holds 80% of the Desert Lion Lithium Project, which includes three past-producing lithium mines. The project is situated on a 301 km² land package and is currently in Phase 1 production, processing stockpiled material and exporting lithium concentrate. The project site is accessible year-round via road and has access to power, water, railway, and port infrastructure.

Back in November 2018, the company released a preliminary economic assessment, which said the initial direct capital cost for a concentrator and lithium carbonate conversion plant would be US$275 million. The estimate includes the cost of by-product circuits and a US$43 million contingency.

The PEA envisaged production of 20,000 tonnes per-year of battery grade lithium carbonate from an average of 2.35 million tonnes per year of run-of-mine mineralization, using conventional processing equipment, producing life-of-mine revenue of US$852 million.

The capital cost for the Desert Lion Lithium Project is amongst the lowest among a group of lithium development peers, Desert Lion said.

In the press release Tuesday, Desert Lion said the agreement with BASF is valid through to December 31, 2019, giving both parties enough time to work towards a definitive offtake agreement.

“This offtake agreement represents another major milestone for the company. We are pleased to be able to align ourselves with BASF for the supply of lithium chemicals to the battery industry,” said Desert Lion CEO Tim Johnston.

Desert Lion acquired the Namibian Lithium Project in January 2017.  It signed an off-take agreement for Phase 1 production with Chinese Lepidolite converter Jiangxi Jinhui Lithium Co. Ltd. in November 2017.

In a December 2017 press release, Desert Lion said it had begun production of lithium concentrate in line with management’s Phase 1 production plan. It said the concentrate was produced from stockpiled material. At that time, the company said the project license contains 700,000 tonnes of stockpiled material and 100,000 tonnes of fines that it planned the process over the next 12 months.

Following the production of lithium concentrate from the stockpiled material, Desert Lion said it would commence production of lithium concentrate from in situ ore, likely in the second half of 2019.

Desert Lion is the product of a reverse takeover deal with Camex Energy Corp. that was announced in October, 2017.